Singapore’s Sembcorp Marine (SGX:S51) has released the financial and operating metrics of its proposed combination with a restructured Keppel Offshore and Marine (Keppel O&M) (SGX:BN4) in a response to queries from its shareholders that fear share dilution.
The offshore yard also took great pains to explain the rationale of the proposed mega merger, which is seen as necessary in these “unprecedented times”.
Amongst the metrics unveiled is an order book of S$6.4 billion US$4.62 billion), and revenue of S$3.9 billion, assuming that the merger is backdated to 31 December 2021.
The bigger order book of the combined entity will also allow Sembcorp Marine to optimise its larger and newer yards in Singapore and Brazil, said the company in a lengthy explainer.
Meanwhile, the illustrative net tangible assets (NTA) for the combined entity is at S$4.7 billion, and NTA per share is at S$0.07.
Overall, Sembcorp Marine said the combined entity will be able to “accelerate its advancement into the cleaner and greener O&M and energy market, ensuring it is well placed to respond to new challenges and the evolving priorities of a low carbon economy.”
“Sembcorp Marine and Keppel O&M are Singapore’s home-grown marine icons, and the Proposed Combination will create a premier global player with a deep engineering heritage to offer offshore renewables, new energy and cleaner solutions in the O&M sector, creating significant value on multiple levels for all its stakeholders,” Sembcorp Marine added.
But as The Edge reported, investors have, by and large accepted the rationale and possibly necessity of such a combination. “What investors are questioning is how the investment bankers got to the ratio of Sembcorp Marine’s investors being given 44% of the combined entity versus 50% to Keppel Corp (Keppel O&M’s shareholder). Both investors and market observers argue that Sembcorp Marine’s shareholders are likely to be diluted,” said the Singapore business publication.
Unprecedented Times for Offshore Oil and Gas
“The offshore & marine (O&M) sector has faced a prolonged and severe downturn since 2015, exacerbated by the rapid global transition towards renewables and clean energy, as well as significant disruptions during the COVID-19 pandemic. While oil prices have rallied in recent months and conditions in the O&M sector are improving, the long-term outlook for the O&M sector will continue to shift amid the energy transition. These are unprecedented times,” said Sembcorp.
A Restructured Keppel O&M Enhances Value
A restructured Keppel O&M enhances value of the combined entity and benefits Sembcorp Marine shareholders, claims the yard.
“The existing assets of Keppel O&M include legacy rigs and associated receivables, and Keppel Floatel International Ltd and Dyna-Mac Holdings Ltd – entities which were loss making in both 2019 and 2020. These assets have been deemed incongruent to the proposed combination and are excluded from the restructured Keppel O&M. Therefore, the combined entity will acquire a restructured Keppel O&M free of its legacy rigs, associated receivables, and Floatel and Dyna-Mac. In addition, approximately S$4 billion of inter-company payables due from Keppel O&M to parent Keppel have also been removed from the restructured Keppel O&M’s balance sheet as part of the Asset Co transaction,” said Sembcorp.
“The restructured Keppel O&M will have minimal net debt upon completion of the proposed combination as Keppel has equitised most of its perpetual securities of approximately S$1.8 billion in Keppel O&M.
With the revised and cleaner capital structure and without Keppel O&M’s legacy rigs, the restructuring of Keppel O&M prior to the proposed combination is expected to be beneficial to the combined entity and Sembcorp Marine shareholders. This will ensure that the combined entity starts with the right operational footing and management focus of securing and delivering new orders,” added the company.